Posts Tagged ‘QE3’
I’d like to turn the keyboard today over to my colleague Anthony Jasansky, P. Eng. He’s been a 30-plus-year student of the Dow Jones Industrial Average, and I agree with what he says below in his analysis of the where the market is headed between now and the end of 2012.
As Anthony says below, as traders increase or lower their positions over the next four weeks; I see the uneducated popular media blaming the on/off “fiscal cliff” for the market’s gyrations. But the bottom line is clear: each year since 2009, the yearly increase in the Dow Jones Industrial Average has been getting weaker and weaker.
Here’s a chart showing the annual increase in the Dow Jones Industrial Average since 2009:
Market Insider Bulletin, December 2012
2009: Dow Jones Industrial Average increases 18.8% over 2008
2010: Dow Jones Industrial Average increases 11.0% over 2009
2011: Dow Jones Industrial Average increases 5.5% over 2010
The common denominator in the above chart? In each year since the Great Recession, the Dow Jones Industrial Average has logged a gain of only 50% to 60% of the previous year’s gain.
If today was the last trading day of the year, the Dow Jones Industrial Average would be up 6.6% for the year. In keeping with the three-year trend, the Dow Jones Industrial Average would have to fall about 400 points between now and year-end. I see this move on the downside as being more of a reality than an upside move.
Here are Anthony’s comments as promised:
“The quandary with the Fed’s monetary magic is that it no longer gives the … Read More
I know most people are tired about hearing of the economic problems in the eurozone. But my readers need to be aware: a new perfect storm is brewing because of that situation.
The credit crisis in the eurozone has already created enough troubles in the global economy, but it is threatening to trigger more. Here is what Fed Chairman Ben Bernanke said last week, “…the elevated levels of stress in European economies and uncertainty about how the problems there will be resolved are adding to the risks that U.S. financial institutions, businesses, and households must consider when making lending and investment decisions.” (Source: ‘The Economic Recovery and Economic Policy,” Federal Reserve, November 20, 2012.)
Not many in the media picked this up, but it was very important. Bernanke, regardless of what you think of his policies, is the head of the most important central bank in the world…and a very intelligent man. He knows exactly what he and the Fed are doing. It’s unprecedented to have the head of the Fed warning Americans about a crisis in countries so far away.
It doesn’t take a rocket scientist to figure out now that growth in the global economy has stalled because of the eurozone crisis. (I started writing in January of this year that the eurozone would fall back into recession in 2012 and that it would caused economic problems for the U.S.) The eurozone credit crisis is far from over—one country after another in that area is falling into a recession and this in turn is causing the global economy to deteriorate further.
The region is now experiencing an … Read More
The stock market has more downside over the near term, but it’s likely to hit a floor as soon as price-to-earnings (P/E) multiples are no longer excessive. In many ways, the current pullback is the selloff we didn’t get after the third round of quantitative easing (QE3) was announced. This is a market that’s fragile, and investors are worried about new austerity measures in the near future.
As the main stock market indices pull back, there are a number of market leaders that are now more attractively priced, and they are worth keeping an eye on. Alexion Pharmaceuticals, Inc. (NASDAQ/ALXN) is one of the market leaders among biotechnology stocks, while The TJX Companies, Inc. (NYSE/TJX) is one of the market leaders among retailers.
The TJX Companies operates many brand-name stores that you might be familiar with, including T.J Maxx, Marshalls, HomeGoods, Winners, and HomeSense. This company has been hugely successful both in its operations and on the stock market over the last couple of years, and it’s because economic times have been tough. Selling clothing and home goods at an attractive price point, The TJX Companies has been able to grow its business when other retailers, like J.C. Penney Company, Inc. (NYSE/JCP), have struggled. You can see the contrast in the companies’ stock charts featured below.
Chart courtesy of www.StockCharts.com
Chart courtesy of www.StockCharts.com
The TJX Companies is one of a number of market leaders in this stock market, and it’s up about ten-fold since the beginning of 2000. The stock has been appreciating very consistently and has proven to reaccelerate after all its major price corrections. This is why … Read More
Over the last 12 months, there has been some serious wealth creation from the stock market. Now things are pulling back, because global economic reality has finally usurped the artificial enthusiasm regarding the third round of quantitative easing (QE3). (See “Warning: QE3 Rally Is Now Over.”) As we know, not all industry groups have experienced the same levels of business conditions this year. But as a stock market sector, some of the strongest wealth creation over the last 12 months has come from biotechnology stocks. The NASDAQ Composite Index, representing a lot of pure play technology stocks did well this year, but the NASDAQ Biotechnology Index did far better.
As you know, I’m not an advocate of equity investors taking up new positions in this stock market. I think the current stock market pullback has more legs, and rightly so—things aren’t so great in the world and the stock market is worried about the upcoming fiscal cliff.
I like a number of dividend-paying blue chips, but I’d hold off initiating new positions. But for risk-capital, speculative investors, one of the best areas of the stock market remains biotechnology stocks, and what I think speculators should be doing now is identifying the strongest names within the sector in anticipation of an attractive entry point for traders.
In doing so, all you need to do is pick and choose among the biotechnology stocks that compose the NASDAQ Biotechnology Index. All the best up-and-coming companies are there, and no matter what happens to the rest of the stock market or the global economy, there’s big money to be made from … Read More
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